United States of America
The English colonisation of the Atlantic coast was of the greatest importance to the history of the future United States. From 1664, England—and later the Kingdom of Great Britain—gradually took possession of Dutch and some French settlements in North America, creating 13 colonies on the coast by 1773. These became the foundation of the future USA.
Reckless interference by the mother country in the affairs of the colonies provoked anti-British opposition. One particularly notorious incident was the Boston Tea Party. Tensions culminated in 1775 with the outbreak of open war between the colonies and Great Britain. On 4 July 1776, the Second Continental Congress issued the Declaration of Independence, proclaiming the formation of the United States of America.
The massive economic development after the end of the Civil War made the USA the most economically powerful country in the world by 1872. Industrialists such as Cornelius Vanderbilt, John D. Rockefeller, Henry Ford, Andrew Carnegie, and banker John Pierpont Morgan were behind this boom in the late 19th and early 20th centuries.
The United States became one of the world’s superpowers at the beginning of the 20th century.
The 1920s brought another massive economic boom. American self-confidence was shaken by the Wall Street Crash of 1929, which caused a worldwide economic crisis that catalysed political developments in Europe in particular. In the United States itself, it led to the abandonment of pure “laissez faire” economic policies (i.e. no state involvement in private companies) and greater state intervention in the economy under the New Deal devised by Democrat President Franklin Delano Roosevelt.
World War II was a very profitable business for the United States. They were paid by the Allied nations mostly in gold or territory. As a result, they accumulated two-thirds of the world’s physical gold during World War II. This was one reason why the Bretton Woods monetary system was adopted.
Until the start of World War I, the values of individual currencies were pegged to gold (for example, the US dollar was defined as 1/20th of an ounce of gold), and this peg made it impossible to issue new unbacked money. The enormous war expenditures led the combatants to abandon gold and engage in inflation because inflation is a kind of taxation, but one that—unlike a real tax—does not need to be publicly announced and can be implemented without the public’s informed consent. All major currencies were thus devalued, the dollar a little less so as the United States had entered the war later. After the end of World War I, neither side returned to the original standard.
In July 1944, at the Mount Washington Hotel in the Bretton Woods district of New Hampshire, USA, negotiations (in which Great Britain and the United States of America had the main say) were held between 44 countries on a new monetary system concept that could be introduced in the post-war world. The result was the Bretton Woods Agreement (also known as the dollar-gold equivalence standard) as the first global monetary constitution. The points of this conference were thought out two years in advance. The essence of the agreement was to link the US dollar to gold and all other currencies to the dollar. The dollar itself was pegged as 1/35th of an ounce of gold. However, only governments—not citizens—could exchange dollars for gold. The agreement was signed by all 44 participating countries and went into effect the following year, 1945.
The US dollar was given the status of official global reserve currency, from which the currencies of other countries would be derived. At the same time, the United States had to guarantee the convertibility of the dollar into gold at a fixed rate of USD 35 per troy ounce of gold (a form of gold standard). It was in the interest of the central banks of other countries to create sufficient foreign exchange reserves in US dollars. This retrospectively increased the attractiveness of this currency and strengthened its position in the post-war world.
The Bretton Woods agreement gave birth to the Stabilization Fund, later the International Monetary Fund, which began to supervise the newly created system. The International Bank for Reconstruction and Development (later the World Bank) was then founded.
Individuals could not convert dollars into gold, but the central banks of other countries could. As a result, the central bank of the United States (the Federal Reserve) was obliged to exchange a supplied amount of dollars for a corresponding amount of gold at the request of banks of other countries. However, successive United States governments gradually produced more and more paper money than would correspond to this exchange rate. Other countries, particularly France, responded by demanding the exchange of dollars for gold, leading to withdrawals of the gold held by US banks from US territory, and the United States lost its monetary gold. As the USA had substantial gold reserves after World War II, the system held up for quite a long time, but had begun to crumble by the late 1960s.
The United States responded in March 1968 with an arrangement whereby US monetary gold was to be traded completely separately (still at a price of USD 35 per ounce) from gold on global markets. Other governments committed not to sell or buy this gold elsewhere. In August 1971, when France and Great Britain requested that the Bretton Woods Agreement be fulfilled, the then President Richard Nixon did not comply and abolished the Bretton Woods system by “closing the gold window” on 15 August. This led to an era of floating exchange rates. Within months of the end of the Bretton Woods Agreement, the price of gold had risen tenfold.